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Tax Alert 2017

Clarification regarding the Imposition of 100% Penalty for Failure to Declare Income and Correct Information

Section 2(1) - Interpretation

The Inland Revenue Board of Malaysia has issued a Media Release to provide clarification regarding the imposition of penalty at a rate of 100% which will be implemented with effect from 1 January 2018.

Under the Income Tax Act, 1967, the Director General of Inland Revenue is given the power to impose a penalty for the offence of default in declaring income or in declaring correct income which is subject to tax.

The following are examples of cases which will be subjected to this 100% penalty rate :

1.   Repeated offences of undeclared or incorrectly declared income received by way of a return form;

2.   Refusal to give full co-operation during an audit or investigation process;

3.   Failure to give information or documents requested to assist in an audit or investigation process;

4.   Carrying out an organised tax evasion scheme; or

5.   Failure to comply with the tax law even though the taxpayer has been audited or investigated before.

According to the Inland Revenue Board of Malaysia, the proposal to increase the rate of penalty to 100% of the tax payable on the undeclared or under declared income beginning 1 January 2018 is a step towards elevating the level of voluntary compliance among taxpayers by dealing with taxpayers who are hardcore tax law defaulters. 

To view the full press release from IRB, kindly click below.